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1 Modern Equity Emily Sherwin* Maitland Defined Equity As

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1 Modern Equity Emily Sherwin* Maitland Defined Equity As Modern Equity Emily Sherwin* Maitland defined equity as “that body of laws administered by our English courts of justice which, were it not for the operation of the Judicature Acts, would be administered by courts that would be known as Courts of Equity.”1 The implication is that nothing unifies the various principles, doctrines, and remedies associated with equity other than their procedural origin. This is strictly true, and yet it raises the question why the concept of legal equity has not simply disappeared as procedural merger has become the norm. The answer may be that courts have administered the equitable principles, doctrines, and remedies in ways that are distinct from their administration of ordinary rules of law. The special roles that courts have assigned to equity continue to be important in our modern legal system. One distinguishing feature of equity is that courts have used it to correct unsatisfactory outcomes that sometimes result from the application of general, determinate rules.2 *Frank B. Ingersoll Professor of Law, Cornell Law School. 1F.W. Maitland, Equity and Also the Forms of Action at Common Law (J.H. Chaytor & J. Whittaker, eds.) (Cambridge: Cambridge University Press 1929), 1. 2This is equity in the Aristotelian sense. See Aristotle, Nicomachean Ethics ¶1138b25 (Hackett Pub., Terence Irwin, ed. & trans., 1985) (“And this is the nature of what is decent - rectification of law in so far as the universality of law makes it deficient.”). Although Maitland argued that equity did not follow a set of specifically equitable principles, he did view equity as a supplement or “gloss” on the common law, which softened the operation of common law rules. 1 Determinate rules serve a number of important legal and social purposes, the foremost of which is to enable individuals to coordinate their actions with the actions of others. Yet determinacy builds unacceptable outcomes into the administration of law. Strictly applied, a determinate rule may invite opportunism or it may impose undeserved hardship on a party. Traditionally, another distinguishing feature of equity has been its subordinate position in the system of law. Courts have treated equity as a branch of law that comes into play only when the resolutions offered by legal rules and remedies are objectionable in one way or another. Douglas Laycock has argued at length that courts no longer adhere in practice to traditional standards giving priority to legal remedies.3 Laycock admits, however, that whatever courts may do in fact, they still tend to speak of equity as a secondary component of the legal system. Another traditional feature of equity, both before and after procedural merger, is that equity has operated relatively obscurely within the system. Rules are comparatively easy to grasp, and courts tend to refer first to rules before turning to equitable exceptions. Further, corrective equity often takes the form of defenses that apply only to historically equitable forms See Maitland, Equity, 18-19 (“if the legislature had passed a short act saying ‘Equity is hereby abolished,’ we might still have got on fairly well, in some respects our law would have been barbarous, unjust, absurd, but still the great elementary rights . would have been decently protected.” Id., 19. 3See Douglas Laycock, The Death of the Irreparable Injury Rule 3-23 (New York: Oxford University Press 1991) 3-23 (arguing that although courts continue to cite the rule that equitable relief is not available if the plaintiff has an adequate legal remedy, they do not in practice withhold equitable relief unless there are functional reasons to do so). 2 of relief. The result is to decrease the perceived effects of equitable correction on legal rules: correction appears to be confined to one limited form of legal redress. The combined effect of these three features of equity is to maintain a precarious but useful balance between the benefits of determinate legal rules and the attraction of leniency. For reasons I will describe below, an system of law must provide in some way for corrective equity. At the same time, too much equity can undermine rules and consequently threaten other important ends of the legal system. The problem is that determinate rules, which allow for coordination, and corrective equity, which allows for justice, cannot easily coexist unless equity remains both subordinate to law and relatively obscure. The Legal Realists who shaped American law in the last century were skeptical of rules and enthusiastic about particularized, fact-based decisionmaking. They also disliked obscurity in law and insisted that the grounds of legal decisions should be clear: only through clarity can law be harnessed effectively to social scientific objectives. The result of this combination of attitudes was a program that altered the relation between law and equity by placing corrective equity front and center in the legal system. Pleading and procedure were geared toward facts rather than law and substantive rules were supplemented or replaced by explicitly particularistic doctrines such as unconscionability. If the Realists were wrong about rules, the strategies they pursued may be costly over time. By enlarging and spotlighting equity, they dispensed with the protective cover that once surrounded equitable decisionmaking and limited the effects of equity on general, determinate rules. When rules and equitable correction are equally open to view in a public system of law, the reliability of rules is significantly, and progressively, diminished. This is not to suggest that equity can or should be hidden deliberately from public view. 3 At least in a system that aspires to maintain the allegiance of its citizens, deceptive tactics will backfire. My objective is simply to explain the need for equity and the dilemma that equity poses for law. A. Rules4 One way to look at legal decisionmaking is from the forward-looking perspective of a benevolent lawmaking authority. I assume for this purpose that the lawmaking authority aims to serve the interests of those who are governed by law. I assume also that it approaches this task in a competent way. From the authority’s vantage point, legal rules perform a number of important functions. If the authority has better information about the consequences of behavior than most of its subjects have, it can guide decisionmaking by enacting rules to govern conduct or transactions. Whether or not the authority has superior information, it can enact rules that will enable private actors to coordinate their behavior.5 In the absence of reliable rules, self-regulation may be difficult and in any event individual actors cannot anticipate what others will do. Once a set of 4The most comprehensive source on the benefits of rules and the problems they pose is Frederick Schauer, Playing By the Rules: A Philosophical Examination of Rule-Based Decision- Making in Law and Life (Oxford: Clarendon Press 1991). The points made in this subsection are also discussed at length in Larry Alexander and Emily Sherwin, The Rule of Rules: Morality, Rules, and the Dilemmas of Law (Durham: Duke University Press 2001) 5On the coordination effects of rules, see, e.g., Gerald J. Postema, Coordination and Convention at the Foundations of Law, 11 J. Legal Stud.(1982) 165, 172-86. 4 rules is in place and regularly followed, it becomes easier to anticipate what others will do and so to plan around the predicted conduct. Finally, regularly followed rules settle controversy and uncertainty that might otherwise consume individual and social resources. To provide these benefits, rules must be general in application and reasonably determinate.6 Generality allows the rulemaker to provide in a single rule for similarly situated parties and like cases that cannot be fully specified in advance. Determinacy enables the rule to provide effective guidance, to serve as a basis for coordination, and to settle controversy in terms that do not revive the dispute when the rule is interpreted and applied. General and relatively determinate rules, however, will sometimes prescribe outcomes that are incorrect, all things considered. General language chosen in advance will cover unanticipated cases in which the rule’s prescription is out of place. Determinate terms will sweep in some situations that a more open-ended inquiry would exclude. If the errors brought about by a general, determinate rule are too frequent or too great, the rule should be discarded or revised. In at least some cases, however, the benefits a rule provides through guidance, coordination, and settlement are more significant than the errors it periodically 6See Schauer, Playing By the Rules, 53-68. The arguments made here assume that rules have a core of determinate meaning, even if their meaning is uncertain in some contexts. See generally Kent Greenawalt, Law and Objectivity (New York: Oxford University Press 1992), 34- 89; H.L.A. Hart, The Concept of Law (Oxford: Clarendon Press 1961), 122-38; Schauer, supra note 3, at 53-68; Jules L. Coleman and Brian Leiter, Determinacy, Objectivity, and Authority, 142 U. Pa. L. Rev. 549 (1993); Lawrence B. Solum, On the Indeterminacy Crisis: Critiquing Critical Dogma, 54 U. Chi. L. Rev. 462 (1987) 5 generates. In that case, the rule is a good rule and should be retained.7 I will assume, for the purpose of this essay, that the rules at issue are good rules in this sense, despite some flawed results. It might be thought that the flawed results of justified rules can be eliminated by adding a general exception for all cases in which, as a result of a rule’s generality and determinate language, the rule prescribes a wrong result. In other words, it might be thought that the solution is a policy of unlimited corrective equity. An general equitable exception of this kind would come into play at the time the rule is applied to a particular set of facts, when more is known about the likely consequences of following the rule.
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